GOOG Gagged

The US Treasury threw a party Monday, bailing out Fannie, Freddie, and the FHLB system as well as the multitudes that had previously purchased their debts. As a result the US broad market soared, but the NASDAQ barely participated and Google did anything but, falling a "very big" -5.5%. GOOG has been on a downslope of late, falling 4 of the past 5 days, in-fact it was as high as $482 just last Tuesday. Alas Google closed Monday's session at $419.95, down -9.4% for the week even though the S&P 500, an index of which it is a member, rallied more than 2%. Is such a divergence a tipoff of further weakness or will GOOG get its act together?

A: The future doesn't look that bright for Google, with all 7 of the past instances falling over the next 17 to 21 trading days. GOOG has shown a very strong bearish edge that peaks 19 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Monday, 8 September 2008) is Friday, 3 October 2008. GOOG declines in 100% of the cases (7 of 7) by an average of -6.5% relative to the close on the event date. The overall return of the 7 cases is -6.5%, which, based on the close of GOOG on the event date (419.95), provides a target price of 392.65.

The t-stat, tested at the -4% hurdle, is a solid -2.5 which places the test in the 97.5% Confidence interval, meanwhile the Sharpe ratio (ZStat in the table below) is an incredible -2.25.

Jason Thompson is a Chicago-based speculator focusing on electronically traded derivatives and their underlying instruments.

Let variable values:
@	=	GII.GOOG.NASDAQ
theEvent	=	IF
   1 value percent_move of @  is less than
   (30 day average of 1 value percent_move of @   -
    (1 * 30 day std_dev of 1 value percent_move of @
    )
   )
AND
  1 value percent_move of SPX  is more than
  (30 day average of 1 value percent_move of SPX   +
   (1 * 30 day std_dev of 1 value percent_move of SPX
   )
  )
THEN 1
ENDIF


      Date   Day           t+17           t+18           t+19           t+20           t+21

10/26/2004   Tue          -7.84          -6.82          -9.19          -7.85          -3.87
11/04/2004   Thu          -1.47          -2.57          -2.87          -2.33          -4.55
02/04/2005   Fri          -9.39          -8.49          -9.03          -7.61          -9.38
06/27/2007   Wed          -2.62          -2.34          -3.14          -3.48          -2.74
01/23/2008   Wed          -3.46          -7.23          -7.22          -8.34          -7.44
02/01/2008   Fri          -8.34          -7.85          -8.67         -11.41         -13.82
02/25/2008   Mon         -11.19         -10.87          -5.32          -7.33          -5.81
09/08/2008   Mon            NaN            NaN            NaN            NaN            NaN

             Avg          -6.33          -6.60          -6.49          -6.91          -6.80
          AvgPos            NaN            NaN            NaN            NaN            NaN
          AvgNeg          -6.33          -6.60          -6.49          -6.91          -6.80
          PctPos           0.00           0.00           0.00           0.00           0.00
          PctNeg         100.00         100.00         100.00         100.00         100.00
         Maximum          -1.47          -2.34          -2.87          -2.33          -2.74
         Minimum         -11.19         -10.87          -9.19         -11.41         -13.82
          StdDev           3.76           3.12           2.73           3.07           3.82
           ZStat          -1.68          -2.12          -2.38          -2.25          -1.78
        Variance          14.15           9.72           7.45           9.45          14.58


8 Occurrences

XMIM Query Source

Comments: